Do You Have More Debt Than the Average American?

American credit debt
American credit debt

Since the beginning of the recession, Americans have been saving more, paying down debt, and curbing spending. Now, a new study shows that individual debt is falling at the fastest rate in nearly 50 years. But not everyone is contributing positively to that statistic, and many Americans are still struggling with overwhelming debt.

Americans have increasingly been paying down their mortgage and credit card balances. But even as total consumer debt has diminished by approximately $100 billion (down to a mere $11.4 trillion), more than $1 trillion of our current debt load is delinquent, and nearly $800 billion of that is overdue by more than 90 days. And while owing less is a good thing, the study shows that we're burning through our savings to pay our debts down. The overall net worth of the average American is down nearly 40% from 2007 to 2010.

Much of that decrease has come from the steep decline in home values. The National Association of Realtors recently released statistics on the sales of existing homes in May 2012, which showed mixed news. Overall, home sales are down, but the median sales price is up to $182,000.

Credit card debt may be the third largest form of debt in the U.S., but it's decreasing. Americans paid off 5.2% of outstanding credit card debt in 2012, which is 12% more than in 2011, but 8% less than in 2010.

Borrow, Learn, Earn?

Overall household debt has fallen steadily since 2008, but the same can't be said for student loan debt, the level of which has risen every quarter since 2003. It reached $904 billion in the first quarter of 2012, an increase of $30 billion from the last quarter of 2011.

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The average student loan debt is approximately $23,000. Last year, for the first time, Americans owed more on student loans overall than they did on their credit cards.

Today, the average American owes approximately $47,000. To put that number in perspective: It costs approximately $35,000 to start either an H&R Block or a 7-Eleven franchise; $40,000 can buy a three-bedroom house in some parts of Orlando, Fla., (and home prices are similar in hard-hit neighborhoods across the country); and one year at a private high school will run about $50,000.

Our average level of debt is also more than most of us earn in a year. For 2010 (the latest year for which figures are available), the Social Security Administration calculated that the average American salary was $41,673.83.

All Debt Is Not Created Equal

While it's helpful to get a sense of where Americans are struggling financially, such statistics are a mere snapshot of much larger, denser, and more complex issues.

%Gallery-157530%The level of credit card debt isn't broken down into categories -- for instance, discretionary spending versus necessary living expenses. Is someone putting a new iPod on the credit card, or are they buying food for the family? Hidden in credit card debt could also be educational expenses posing as discretionary spending. Are students who were unable to obtain educational loans using their plastic to pay for classes or books? Or, from a different angle, have homeowners pushed debt from the credit car to the mortgage category by taking out home equity loans to pay off high-interest credit cards?

Such snapshots also don't take into account the wide range of interest rates each type of debt carries. As of today, the average rate for a 30-year mortgage is around 3.6%. For a balance-transfer credit card, an average rate is more than 16%. The standard rate for federal student loans is 3.4%. (That was set to double to 6.8% this week, but on Sunday, Congress slipped in just ahead of the deadline and passed a deal to extend the lower rates for another year.) But looking at the overall debt load each American carries, regardless of interest rates, is the necessary starting point of a much longer struggle.

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Molly McCluskey is a regular contributor to The Motley Fool. Follow her on Twitter at @MollyEMcCluskey.